Almost anyone can invest into a bull market and come off looking like a genius. But when shit hits the fan, and the economy goes belly up (as seen from the covid-19 fall out that is still evolving by the way), and businesses scramble to survive, cash is still king.
As we take in the news of how governments around the world are taking action to halt or slow the spread of the covid-19 virus, we’re also anticipating the impact of those actions on the economy at large.
Travel and Hospitality
The travel and hotel industries have been hit especially hard. From all-out bans of travel in and out of the country (Italy, Malaysia), or partial travel bans and advisories to multiple cities, airlines, hotels and tourism related businesses are all badly impacted.
Expedia, still reeling from the sudden departures of CEO and CFO in December, announced a round of layoffs from Chairman Barry Diller in a bid to stem the bloated company and right the ship. (In hindsight, Mark Okerstrom clearly got the long end of the stick, leaving with a nearly $12m exit package at the time)
Even with these announcements, the stock plummeted more than 50% in a month.
Equities
We are in official bear territory when it comes to the stock market. Just last month we were pondering how soon the Dow Jones will hit 30,000. Now, we’re possibly days away from dipping under 20,000. Scratch that. We just did.
I’m not logging into my investment account because if I do, I will just sit in a corner and cry. All day. What’s important to remember now is that this will all pass, and that we should, as far as possible, try to remain calm and buy into the dip to average in.
Gold
Gold, long seen as a safe haven and having a negative co-relation with the stock market, has also seen it sustain a beating from investors fleeing everything in search of liquidity.
Digital Gold AKA Bitcoin
When we talk about gold, it’s difficult not to talk about what’s been touted as digital gold, or Bitcoin.
Bitcoin was born as a result of the last housing crash of 2008, and created in 2009 in search of a better currency. One that is not controlled by any government and thus cannot be manipulated or printed nilly willy.
Bitcoin grew from practically worthless to almost USD$20,000 in December 2017. It was hovering around $10,000 mark when Covid-19 struck. It too, took a severe hit, down by about 50% from the $10,000 peak in February.
The halvening is happening in almost exactly 2 months time, and hopefully the lower supply will help spark Bitcoin back to life. But we never know what will happen.
Knock-on Effects
With the stock market, gold and bitcoin decimated, businesses impacted due to closures, travel bans and stay home quarantines, people are bound to get laid off in order for businesses to continue to be operational.
As everyone seeks and holds on to liquidity, I believe the housing market will be the next to face the crunch, and those who are laid off will not be able to pay their mortgages and lead to another housing crisis.
Governments around the world are all introducing stimulus packages, but it remains to be seen, how effective they really will be.
Which brings me back to the title of this post.
Invest all you want, in the knowledge that, in the long term, it’s most probably the right thing to do, but always, always, keep a stash of cash. Because in uncertain times like this, Cash is still King.
And, you know, toilet paper.